A New Year, A New IBM Systems and Technology Group

January 7, 2008 Timothy Prickett Morgan

IBM‘s desire to get a much larger share of IT sales to small and medium business (SMBs) and the company’s heavy reliance on the financial sector for core software and system sales has compelled the company’s top brass to reorganize its Systems and Technology Group. Bill Zeitler has managed IBM’s server and systems unit for so long that no one can remember his predecessor–hint: there wasn’t one–and last Thursday he told STG employees about the final phase of a year-long transformation that has been underway in the group.

A year ago, IBM carved out a new SMB-focused division called Business Systems from within STG, which was given a mandate to create a line of integrated, easy-to-use, affordable products that SMB shops would want to buy. (Let’s face it, mainframes are not for everyone, after all, and neither are big Unix or i5/OS boxes.) The SMB part of the IT market has been growing faster than the enterprise part that IBM has a dominant share of for a long time, and the SMB space is where Hewlett-Packard, Dell, and Microsoft all get their fuel for growth. Big Blue wants a bigger piece of that little action, and it is reorganizing itself to focus on customers, not product lines, and on creating the products–hardware, software, and services that span IBM’s divisions–customers want to buy, not just the ones IBM has made and wants to sell.

Hey, Legacy STG–Go SOA Yourself!

To that end, according to the memo that Zeitler sent to STG employees on January 3, IBM is adding a new set of divisions to STG that face customers and that compliment the reorganized product divisions that were the result of the January and July 2007 reorganizations in the group. Most of the players who were given prominent roles in last year’s reorganization are in key positions this year, but many have changed jobs. This is absolutely in keeping with IBM’s long history of cross-training high-level executives on different platforms and in different areas–sales, marketing, channels, and so forth.

In a funny way, with the final reorganization announced last week, IBM is taking an SOA-style approach to marketing and development for Systems and Technology Group. In the far past, the four server divisions at Big Blue, as well as its Personal Systems unit, were almost like separate companies, with their own budgets, research and development processes, marketing and sales operations, and distribution channels. Beginning in the middle 1990s, when IBM got itself off of the financial rocks it ran aground on in the early 1990s, IBM started breaking down the walls between server divisions so it could make better use of technologies and lower costs. But marketing, sales, and distribution were largely still separate entities. With this latest transformation, the basic server units (themselves a necessary legacy of the fact that IBM makes and sells different types of servers) that have existed for some time–mainframe, Power systems, X64 and blade servers, and storage–are still there, but they have a customer-facing veneer of marketing and development that rides on top of the server stacks and allows IBM to cross divisions to make and sell new products based on that underlying technology.

According to Zeitler’s memo, which you can read here, IBM is adding three new client segment divisions that sit alongside the existing Business Systems division. They are Enterprise Systems, which is headed up by Jim Stallings, who has been running the System z division since he replaced Erich Clementi a year ago; Industry Systems, which is led by Curtis Tearte, who was named to a new unit from last year called Infrastructure Solutions that spanned retail systems, printers, Linux, grid and high performance computing, virtualization, On Demand, and Internet technologies; and Adalio Sanchez, who was put in charge of a division called Collaboration Solutions a year ago to push IBM’s custom electronics and software manufacturing capabilities, which seems to have been rolled back into Microelectronics. Marc Dupaquier, a long-time Software Group executive, was named as general manager of Business Systems a year ago, and was prepping for a launch of a new System i product line, but he was replaced last week by Clementi as GM for Business Systems.

Here’s how Zeitler explained the roles of the client-facing general managers. “These general managers will be responsible for delivering on STG’s revenue and profit plan, and product mix objectives; managing client satisfaction; developing a point of view on key issues in their client segment; establishing and enabling market plays; providing requirements for future systems and technology solutions; and running sales cadences.” All four executives report to Zeitler directly, not through product groups.

The product divisions have changed a little bit, too, and Zeitler outlined what their responsibilities would be as distinct from those of the four divisions described above. The product divisions include Mainframe Systems, led by Anne Altman, who has been general manager of IBM’s Federal sales division; Power Systems, still led by Ross Mauri, who took that job in July 2007; Modular Systems, formerly known as the System x division that now includes X64-based rack and tower servers as well as the BladeCenter blade servers, led by Rich Hume, who took over as GM of System x when Susan Whitney retired last February; and Storage, headed up by Andy Monshaw, who took over a year ago. Here’s how Zeitler described their roles as product line general managers: “These general managers will be responsible for product competitiveness; program profitability; stack integration of the complete solution; sales support; strategic, market-based portfolio management; ecosystems management; end-to-end quality management and product technical support; and supply, demand, inventory and delivery management.” All of these GMs report directly to Zeitler, too.

As part of the reorganization, IBM has created over 300 system sales manager positions, who have the complete responsibility for a group of IBM clients and who work with IBM’s Sales and Distribution sales and channel organization to keep these clients happy. IBM has roughly 500,000 customers worldwide, and nearly half of them are AS/400, iSeries, and System i shops that have bought lots of other iron and software–often from other suppliers–over the years. To say that this upsets IBM is an understatement. IBM has been very clear that it wants about a third of the SMB market, as much as it wanted to get a third of the enterprise server market a decade ago and was able to get with a lot of engineering, price cutting, and sweat. The sales teams that interface with clients will be comprised of platform experts paired with industry experts, who can tag-team each other to make sales and, more importantly, make it easier and quicker for customers to buy the right gear from Big Blue.

The next logical thing for IBM to do, of course, is to create companion Enterprise Systems, Business Systems, Industry Systems abstraction layers for the products created and marketed by its Software Group, Global Business Services, and Global Business Technology groups. That way, IBM’s client-facing development and marketing people can approach clients for system and storage platforms; database, middleware, and development software; and various services all at the same time and in an integrated fashion. No word yet if IBM has plans to do this.

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